How To Guide Your Adult Child Towards Financial Independence?

From the day a child is born into a family, it is an unwritten code for parents to devote themselves to provide and protect their child’s future. Along with love and emotional support, as parents, you shower them with material comfort and financial security, even if it comes at the cost of your financial well-being. Well, many of you indeed use your retirement funds to fulfill your kid’s wish to study MBA abroad or spend the money kept aside for old age on their wedding. Some of you even fund their travel plans or help them buy a property. However, the concern here is, “If this is the right way to approach your child’s goals?” 

To put it simply, most of you intend to provide this monetary support until your child is in a better financial position. But, it would be also fair to mention that providing ongoing financial help to your adult child, in some circumstances, can also create an unhealthy financial dependence on you. 

So, should you financially support your adult child? 

Well, the answer is - it depends on the given circumstance. But before you are considering helping your adult child financially, it becomes imperative to first understand your financial position as well as your kid’s. For example, try to identify if this is a rare instance where he/she is facing a genuine monetary crisis, and how your financial aid could be helpful. Or if the monetary needs spring from his/her refusal to take up financial responsibility or hold a steady job. In such a situation, if you still go ahead and help them, it is a bad idea, as it could keep them from learning valuable life lessons. 

Should the money be given as a loan?

Undoubtedly, as parents, you are always willing to help your child(ren) financially. But except for medical emergencies, it would be wise that all other financial help is offered to an adult child in the form of a loan(s). If your child aspires to pursue an MBA course from a renowned institute, you should encourage him/her to go for it, but at his/her own cost. 

Firstly, adult children can aim for a scholarship. If they are unable to get one, subsequently, they can apply for a loan to finance their education. What you can do is help them draft a legal agreement, including the purpose of the loan and the amount required, time frame for repayment, and options in case of defaults. Both of you and your child should have a copy of the agreement. You should also keep motivating them to invest or avail health insurance plans that can be their saviour in case of any medical emergencies in the family.

Having said that, it is also to keep in mind that giving money to your adult child can be a touchy subject, on both ends. For your child, this is maybe an embarrassing favour for them to ask of you - after all, they’re supposed to be adults. On the other side, it isn’t wise to often give money to adult children because it may keep them away from shouldering financial responsibilities. More so, if financially aiding your adult kids is creating a barrier to their independence – or your finances are suffering – therefore, a more prudent way is to talk about it with them. Besides, you can also guide them on how to earn money and manage finances for the future. Suggest ways to cut down expenses, work with them on creating a budget, or help them invest in health insurance policies. 

In a nutshell, if you wish your child to grow up to become financially responsible as well as independent, teach them how to manage money in their formative years. These aforementioned points are a few ways to keep away financial differences between you and your child. Above all, what also matters is you make sure your children know you love, respect, and support them, whether you help financially or not.

The author is  Co-Founder of Junio

DISCLAIMER: Views expressed are the authors' own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.